Stock buyback!

Nettlesome Seas.

Factors emerge and gain attention as deciding underlying factors in market moves, then subfactors arise or yet another factor altogether emerges to join the deciding forces, making for a new mix.

The news trends pressing on the stock market at the end of last week centered on the Fed’s retreat from interest rate hikes, better than expected corporate earnings and a more sanguine view on the Trump trade war outcome.

What actually drives this market rebound is corporate stock buybacks, a convincing story concludes.
The notion had been in currency during the year just passed.

The market (S&P500) is up 19% from where it was Dec 24. But EPFR Global tracking of outflows from funds are growing each week, meaning individual and institutional investors are going to the sidelines – and into corporate bonds and emerging markets. The speed of the market rally in uncomfortable said a BAM investment strategy chief.

Stock buybacks (which have replaced dividends  as a means to improve share holders holdings) allow improve earnings per share measures of stock performance. Where stocks were once a form of leverage for investment for growing a company, now they are a way of moving money around. Goldman Sachs estimates that corporations will be the largest buyer of shares (about $700 billion worth) this year. What would it take to change that? And if it changed what would the next result be?

Related
https://www.nytimes.com/2019/02/25/business/stock-market-buybacks.html